Tata Motors' Nano moves from dream to reality

Commentary: But ensuring commercial success will be a challenge

By

V.Phani Kumar

HONG KONG (MarketWatch) -- Tata Motors' Nano deserved every bit of the praise and adulation it received last week, for the sake of those who dreamt it up first and then diligently went about pursuing that dream.

Investors in the Indian automobile major
TTM, -1.22%
however, will likely be aware that ensuring its commercial success will be as challenging, if not more, as managing the venerable Jaguar and Land Rover brands that it is set to acquire from Ford Motor Co.
F, +0.81%

Conceptualized several years ago by group Chairman Ratan Tata, the "one-lakh rupee ($2,500)" car was initially meant to be built from scooter aggregates, but the project was put on the backburner after a reality check proved that such a vehicle couldn't possibly meet safety and emission standards.

Kick-started a second time, and backed by stronger management resolve and supported by an unconventional engineering approach, the Nano has managed to cover the distance between dream and reality, and its launch is now just a few months away.

On paper, the Nano has all the ingredients for success. With an expected on-road price tag of a little over $3,000, it'll the cheapest car anywhere in the world. The research division of ratings agency Crisil Friday put the Nano's low cost in perspective, when it said the car's price point "translates into a 65% increase in the number of (Indian) families that can afford a car."

An estimated mileage of 17 to 18 kilometers to a liter of gasoline should keep running costs also equally low -- that's a big plus with crude oil at $100 a barrel. And if pictures highlighting the Nano's cute looks and relatively spacious interiors are anything to go by, prospective owners shouldn't feel they've compromised too much for a low-cost alternative.

Needless to say, the Nano's success could potentially change the competitive landscape in India, and possibly across the developing world. But before that happens, Tata Motors will need to sort out a few things.

For one, it needs to make sure that any possible teething problems aren't nearly as serious as they were when it launched the Indica hatchback to enter the passenger car segment a decade ago. Any auto industry expert can tell you that a vehicle goes through a life-cycle of improvement and initially produced batches are never as good as the subsequent ones.

Although the Nano will be the cheapest car around, it will still be an expensive purchase for most Indians -- possibly next only to a home purchase or in some cases, a daughter's wedding -- and major technical snags won't be forgiven.

Secondly, and more importantly, Tata needs to get the message across successfully, that the Nano isn't a cheap car meant only for those who can't afford any better.

For the marketing team, creating the hype around the vehicle was the easier part. The tougher task is to make the vehicle as appealing to all cross-sections of the country's vast middle-class, and to ensure that the Nano, which was conceptualized as the "people's car," isn't perceived as the "poor people's car."

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